Fiscal Implications of Trade Liberalization
48 Pages Posted: 15 Feb 2006
Date Written: May 1995
Abstract
This paper examines the relationship between trade liberalization and the budget deficit, which depends on the specifics of country`s economic structure, and the trade regime which is being liberalized. It relates some popular but incomplete approaches to assessing this issue (such as analysis of the foreign exchange budget) to a more comprehensive approach using an applied general equilibrium model. The argument is illustrated using data from the most recent of a sequence of abortive planned liberalizations in Kenya, as well as a number of stylized illustrations. The conclusions are not only that liberalization may be budget enhancing, but that in certain circumstances it may be strongly so.
JEL Classification: D58, E63, F13, F41
Suggested Citation: Suggested Citation
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